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Escalating home prices are showing signs of leveling off in Ogden, Provo and a few other U.S. cities that have seen large spikes in recent months, a new analysis suggests.
Prevailing rental rates, at the same time, continue to climb higher, according to other reports, especially in Salt Lake City, which by some measures is seeing some of the highest apartment rent increases in the country.
Economists in Florida studying the top 100 largest housing markets say data from the Wasatch Front metropolitan areas north and south of Utah’s capital as well as for Boise, Phoenix and Austin, Texas, show evidence of a pricing “crown” in these cities, meaning home values that have shot up in recent months may have started to plateau.
“It does appear that several areas around the country are at an inflection point,” said Ken Johnson, economist at Florida Atlantic University’s College of Business, located in Boca Raton. The apparent crowning pattern “is common when markets reach the peak of their current housing cycles.”
Their findings emerge as the median price on a single-family home in Salt Lake County has climbed 24% in the past year, to just below $542,250 in October.
The study may comfort some frustrated would-be buyers in Utah, where low interest rates, soaring demand and shrunken supplies of available homes have pushed prices to new heights and slowed sales dramatically.
A recent Utah-based study of home price trends found little evidence that the Wasatch Front’s overheating markets were going to cool anytime soon. Job growth, population increases and a 10-year backlog in homebuilding mean the state’s housing markets could remain tight for years, economists at the University of Utah’s Kem C. Gardner Policy Institute said.
That first-of-its-kind analysis also found that, despite record low interest rates, upward of 72% of the state’s renters were now no longer able to afford a down payment and mortgage for an affordable home.
A separate study by the nonprofit Utah Foundation found that more than 80% of Utahns believe home prices and rents are too high. Most survey respondents said they couldn’t afford their own homes if they wanted to buy them at today’s prices.
Johnson and Eli Beracha, a real estate professor at Florida International University in Miami, published findings in late September that housing in Salt Lake City, Provo and Ogden was among some of the most overpriced in the U.S., with buyers paying premiums of between 44% and 51% above expected long-term price trends.
That study found that all but a handful of the largest U.S. housing markets were likely overpriced, with buyers in well over half those cities paying estimated price premiums of 20% or higher. Boise led the way at the time, with homes reportedly 81% overvalued compared to past pricing history.
Top homebuilders in Utah have challenged that analysis, noting that prices these days reflect relatively high costs for land, labor and building materials — many of which have been inflated by effects of the pandemic on supply chains.
“Everybody thinks builders are getting fat, but this is a worse year for us than last year,” said Clark Ivory, CEO of Ivory Homes, Utah’s largest homebuilder. “And the reason is costs have gone up 29%, and our average price has gone up 22%.”
Johnson and Beracha warn that buyers in overvalued markets may face having to own their homes longer before reselling to realize financial gains on their purchase.
The Florida researchers say the current top five most overvalued U.S. housing markets — including the Ogden and Provo metropolitan areas, ranked third and fourth, respectively — all showed signs of crowning, based on data from 1996 through October.
Their study, which can be viewed online, includes single-family homes, condominiums, town homes and co-ops.
Data shows prices rising rapidly in cities such as Dallas and Atlanta, the researchers said, yielding price premiums even larger than those seen in the buildup to the housing crash that helped produce the Great Recession. In other cities, including Los Angeles and Miami, they said, price rises have slowed, producing premiums well below where they stood before that market downturn over a decade ago.
“This all suggests that some areas of the country learned a valuable lesson about prices,” Johnson said in a news release, “while others hold to the stubborn belief that housing prices grow to the sky.”
As affordable housing for sale appears to move further out of reach for many Utahns, the picture for moderate-income renters might be just as challenging.
Overall, average monthly rents have doubled since before the Great Recession along the Wasatch Front and, according to sources, are now hovering above $1,205 statewide.
A recent Utah Foundation study highlighted rent hikes from January 2019 to July 2021 of more than 50% in Utah and Davis counties.
The online site Zumper said this week that the Salt Lake City metro area now ranks among U.S. cities with some of the fastest-growing rents. Rents on one-bedroom apartments rose 15.4% in Salt Lake City over the past year, the site said, while rents for an average two-bedroom unit grew by 12.7%. In Ogden, rents rose by between 15.6% and 23% over the same period.
The rental property listing site Dwellsy, meanwhile, said median asking rents in Salt Lake City are now a full $325 higher than at the start of 2021, rising 26.5% since January, from $1,225 to $1,550 a month.
Apartment vacancy rates remain at historic lows of around 2% or lower across the Wasatch Front, even as apartment construction continues to boom.